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University Economists review "FairTax"
Americans for FairTax ^ | current | University Economist listed in article

Posted on 11/02/2005 10:09:04 AM PST by Eaglewatcher

-1- An Open Letter to the President, the Congress, and the American people Concerning Reform of the Federal Tax Code

Dear Mr. President, Members of Congress, and Fellow Americans,

We, the undersigned business and university economists, welcome and applaud the ongoing initiative to reform the federal tax code. We urge the President and the Congress to work together in good faith to pass and sign into federal law H.R. 25 and S. 25, which together call for:

• Eliminating all federal income taxes for individuals and corporations,

• Eliminating all federal payroll withholding taxes,

• Abolishing estate and capital gains taxes, and • Repealing the 16th Amendment

We are not calling for elimination of federal taxation, which would be irresponsible and undesirable. Nor does our endorsement call for reduced federal spending. The tax reform plan we endorse is revenue neutral, collecting as much federal tax revenue as the current income tax code, including payroll withholding taxes.

We are calling for elimination of federal income taxes and federal payroll withholding taxes.

We endorse replacing these costly, oppressively complex, and economically inefficient taxes with a progressive national retail sales tax, such as the tax plan offered by H.R. 25 and S. 25 – which is also known as the FairTax Plan. The FairTax Plan has been introduced in the 109th Congress and had 54 co-sponsors in the 108th Congress.

If passed and signed into law, the FairTax Plan would:

• Enable workers and retirees to receive 100% of their paychecks and pension benefits,

• Replace all federal income and payroll taxes with a simple, progressive, visible, efficiently collected national retail sales tax, which would be levied on the final sale of newly produced goods and services,

• Rebate to all households each month the federal sales tax they pay on basic necessities, up to an independently determined level of spending (a.k.a., the poverty level, as determined by the Department of Health and Human Services), which removes the burden of federal taxation on the poor and makes the FairTax Plan as progressive as the current tax code,

• Collect the national sales tax at the retail cash register, just as 45 states already do,

• Set a federal sales tax rate that is revenue neutral, thereby raising the same amount of tax revenue as now raised by federal income taxes plus payroll withholding taxes,

• Continue Social Security and Medicare benefits as provided by law; only the means of tax collection changes,

• Eliminate all filing of individual federal tax returns,

• Eliminate the IRS and all audits of individual taxpayers; only audits of retailers would be needed, greatly reducing the cost of enforcing the federal tax code,

An Open Letter to the President, the Congress, and the American people -2- • Allow states the option of collecting the national retail sales tax, in return for a fee, along with their state and local sales taxes,

• Collect federal sales tax from every retail consumer in the country, whether citizen or undocumented alien, which will enlarge the federal tax base,

• Collect federal sales tax on all consumption spending on new final goods and services, whether the dollars used to finance the spending are generated legally, illegally, or in the huge “underground economy,”

• Dramatically reduce federal tax compliance costs paid by businesses, which are now embedded and hidden in retail prices, placing U.S. businesses at a disadvantage in world markets,

• Bring greater accountability and visibility to federal tax collection,

• Attract foreign equity investment to the United States, as well as encourage U.S. firms to locate new capital projects in the United States that might otherwise go abroad, and

• Not tax spending for education, since H.R. 25 and S. 25 define expenditure on education to be investment, not consumption, which will make education about half as expensive for American families as it is now.

The current U.S. income tax code is widely regarded by just about everyone as unfair, complex, wasteful, confusing, and costly. Businesses and other organizations spend more than six billion hours each year complying with the federal tax code. Estimated compliance costs conservatively top $225 billion annually – costs that are ultimately embedded in retail prices paid by consumers.

The Internal Revenue Code cannot simply be “fixed,” which is amply demonstrated by more than 35 years of attempted tax code reform, each round resulting in yet more complexity and unrelenting, page-after-page, mind-numbing verbiage (now exceeding 54,000 pages containing more than 2.8 million words). Our nation’s current income tax alters business decisions in ways that limit growth in productivity. The federal income tax also alters saving and investment decisions of households, which dramatically reduces the economy’s potential for growth and job creation.

Payroll withholding taxes are regressive, hitting hardest those least able to pay. Simply stated, the complexity and frequently changing rules of the federal income tax code make our country less competitive in the global economy and rob the nation of its full potential for growth and job creation.

In summary, the economic benefits of the FairTax Plan are compelling. The FairTax Plan eliminates the tax bias against work, saving, and investment, which would lead to higher rates of economic growth, faster growth in productivity, more jobs, lower interest rates, and a higher standard of living for the American people.

An Open Letter to the President, the Congress, and the American people -3- The America proposed by the FairTax Plan would feature:

• no federal income taxes,

• no payroll taxes,

• no self-employment taxes,

• no capital gains taxes,

• no gift or estate taxes,

• no alternative minimum taxes,

• no corporate taxes,

• no payroll withholding,

• no taxes on Social Security benefits or pension benefits,

• no personal tax forms,

• no personal or business income tax record keeping, and

• no personal income tax filing whatsoever.

No Internal Revenue Service; no April 15th; all gone, forever.

We believe that many Americans will favor the FairTax Plan proposed by H.R. 25 and S. 25, although some may say, “it simply can’t be done.” Many said the same thing to the grassroots progressives who won women the right to vote, to those who made collective bargaining a reality for union members, and to the Freedom Riders who made civil rights a reality in America.

We urge Congress not to abandon the FairTax Plan simply because it will be difficult to face the objections of entrenched special interest groups – groups who now benefit from the complexity and tax preferences of the status quo. The comparative advantage and benefits offered by the FairTax Plan to the vast majority of Americans is simply too high a cost to pay.

Therefore, we the undersigned professional and university economists, endorse a progressive national retail sales tax plan, as provided by the FairTax Plan. We urge Congress to make H.R. 25 and S. 25 federal law, and then to work swiftly to repeal the 16th Amendment. Respectfully,

Donald L. Alexander Professor of Economics Western Michigan University

Wayne Angell Angell Economics

Jim Araji Professor of Agricultural Economics University of Idaho

Ray Ball Graduate School of Business University of Chicago

Roger J. Beck Professor Emeritus Southern Illinois University, Carbondale

John J. Bethune Kennedy Chair of Free Enterprise Barton College

David M. Brasington Louisiana State University

Jack A. Chambless Professor of Economics Valencia College

Christopher K. Coombs Louisiana State University

William J. Corcoran, Ph.D. University of Nebraska at Omaha

Eleanor D. Craig Economics Department University of Delaware

-4- An Open Letter to the President, the Congress, and the American people

Susan Dadres, Ph.D. Department of Economics Southern Methodist University

Henry Demmert Santa Clara University

Arthur De Vany Professor Emeritus Economics and Mathematical Behavioral Sciences University of California, Irvine

Pradeep Dubey Leading Professor Center for Game Theory Dept. of Economics SUNY at Stony Brook

Demissew Diro Ejara William Paterson University of New Jersey

Patricia J. Euzent Department of Economics University of Central Florida

John A. Flanders Professor of Business and Economics Central Methodist University

Richard H. Fosberg, Ph.D. William Paterson University

Gary L. French, Ph.D. Senior Vice President Nathan Associates Inc.

Professor James Frew Economics Department Willamette University

K. K. Fung University of Memphis

Satya J. Gabriel, Ph.D. Professor of Economics and Finance Mount Holyoke College

Dave Garthoff Summit College The University of Akron

Ronald D. Gilbert Associate Professor of Economics Texas Tech University

Philip E. Graves Department of Economics University of Colorado

Bettina Bien Greaves, Retired Foundation for Economic Education

John Greenhut, Ph.D. Associate Professor Finance & Business Economics School of Global Management and Leadership Arizona State University

Darrin V. Gulla Dept. of Economics University of Georgia

Jon Halvorson Assistant Professor of Economics Indiana University of Pennsylvania

Reza G. Hamzaee, Ph.D. Professor of Economics & Applied Decision Sciences Department of Economics Missouri Western State College

James M. Hvidding Professor of Economics Kutztown University

F. Jerry Ingram, Ph.D. Professor of Economics and Finance The University of Louisiana-Monroe

Drew Johnson Fellow Davenport Institute for Public Policy Pepperdine University

Steven J. Jordan Visiting Assistant Professor Virginia Tech Department of Economics

Richard E. Just University of Maryland

Dr. Michael S. Kaylen Associate Professor University of Missouri

David L. Kendall Professor of Economics and Finance University of Virginia's College at Wise

Peter M. Kerr Professor of Economics Southeast Missouri State University

Miles Spencer Kimball Professor of Economics University of Michigan

James V. Koch Department of Economics Old Dominion University

Laurence J. Kotlikoff Professor of Economics Boston University

Edward J. López Assistant Professor University of North Texas

Franklin Lopez Tulane University

Salvador Lopez University of West Georgia

Yuri N. Maltsev, Ph.D. Professor of Economics Carthage College

Glenn MacDonald John M. Olin Distinguished Professor of Economics and Strategy Washington University in St. Louis

Dr. John Merrifield, Professor of Economics University of Texas-San Antonio

An Open Letter to the President, the Congress, and the American people -5- Dr. Matt Metzgar Mount Union College

Carlisle Moody Department of Economics College of William and Mary

Andrew P. Morriss Galen J. Roush Professor of Business Law & Regulation Case Western Reserve University School of Law

Timothy Perri Department of Economics Appalachian State University Mark J. Perry School of Management and Department of Economics University of Michigan-Flint

Timothy Peterson Assistant Professor Economics and Management Department Gustavus Adolphus College

Ben Pierce Central Missouri State University

Michael K. Pippenger, Ph.D. Associate Professor of Economics University of Alaska

Robert Piron Professor of Economics Oberlin College

Mattias Polborn Department of Economics University of Illinois

Joseph S. Pomykala, Ph.D. Department of Economics Towson University

Barry Popkin University of North Carolina-Chapel Hill

Steven W. Rick Lecturer, University of Wisconsin Senior Economist, Credit Union National Association

Michael Rizzo Assistant Professor of Economics Centre College

Paul H. Rubin Samuel Candler Dobbs Professor of Economics & Law Department of Economics Emory Univeristy

John Ruggiero University of Dayton

Michael K. Salemi Bowman and Gordon Gray Professor of Economics University of North Carolina at Chapel Hill

Dr. Carole E. Scott Richards College of Business State University of West Georgia

Carlos Seiglie Dept. of Economics Rutgers University

John Semmens Economist Phoenix College, Arizona

Alan C. Shapiro Ivadelle and Theodore Johnson Professor of Banking and Finance Marshall School of Business University of Southern California

Dr. Stephen Shmanske Professor of Economics California State University, Hayward

James F. Smith University of North Carolina- Chapel Hill

Vernon L. Smith Economist W. James Smith Dean of Liberal Arts and Sciences and Professor of Economics University of Colorado at Denver

John C. Soper Boler School of Business John Carroll University

Roger Spencer Professor of Economics Trinity University

Daniel A. Sumner, Director, University of California Agricultural Issues Center and the Frank H. Buck, Jr., Chair Professor, Department of Agricultural and Resource Economics, University of California, Davis

Curtis R. Taylor Professor of Economics and Business Duke University

Robert Vigil Analysis Group, Inc.

John H. Wicks, Ph.D. Professor Emeritus Department of Economics University of Montana

F. Scott Wilson, Ph.D. Canisius College

Mokhlis Y. Zaki Professor of Economics Emeritus Northern Michigan University

An Open Letter to the President, the Congress, and the American people -6-


TOPICS: Business/Economy; Constitution/Conservatism; Government
KEYWORDS: economics; fairtax; nationalsalestax; nrst; tax; taxreform
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To: Mojave

Yes, in fact, they are bad since they end up raising the tax burden of the rest of us.

It's much better to have NO income-based taxes and no consequent manipulation of the tax code allowing hidden taxes on certain segments ... IOW it's much better and fairer to have the FairTax.


361 posted on 11/08/2005 8:27:28 PM PST by pigdog
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To: Polybius

You are going to pay what amounts to double taxation even under the present tax system when you spend the saved money (if not when you withdraw it dure to some quirk in the tax law you haven't seen or to a change legislated before you spend it).

There are costs embedded into prices of everything we buy at present due to the income-based tax system. These increased prices amount to a hidden tax you will pay no matter what you buy. With the FairTax at least you have the ability to control the amount and timing of your consumption and not everything is taxed.


362 posted on 11/08/2005 8:33:11 PM PST by pigdog
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To: Polybius

See #362; you'll get taxed a second time even under the present systsem. Why don't you demand the same treatment under the present system???

Better yet, why not fact up to the realization that you've been had by the government and help pass the FairTax to stop the sort of nonsense you complain about? You'll be taxed wither way, but with the FairTax at least you'll know the tax rate, be able to control the purchase and its timing and in some cases make untaxed purchases. you can't do that under the present system.


363 posted on 11/08/2005 8:42:26 PM PST by pigdog
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To: lewislynn

As has been pointed out to you many times on this very subject, Looey, you're the one who doesn't get it.

What you post is wrong, The SS & M/C money is controlled by other laws - not the FairTax. The language you try to misuse is merely to define how the revenue is split to conver those legally mandated amounts.


364 posted on 11/08/2005 8:45:57 PM PST by pigdog
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To: Your Nightmare; pigdog
Your hero Boortz says state taxes are apply to the FairTax. He was pimping this as a great thing for the states on C-SPAN.

Boortz is one of those alien things called a reformer. I'm sure you have heard that expression before. It refers to changing things for the better as long as those changes are REALLY better. I have read your plugs for a VAT and have listened and learned from your arguments about the true effect of imbedded taxes.

I have to tell you that I still see you as some sort of statist malignancy if you would even consider a VAT. I also have to admit to you that, even though your earlier arguments about the true rate of imbedded taxes made a lot of sense, that your current status has veered very far from those days.

On the FT side, we have invited alternatives from all corners of the opposition but, unfortunately, most of you choose to snipe and run. You (YN) have offered an alternative that most sane people would find repugnant (a hidden tax on production) but at least you have offered.

Boortz, Linder and the Fair Tax coalition have offered an alternative, have had it researched by economists (yeah, well), have introduced a bill for years now - with sponsors, and have toured the country at book signings and rallies.

Maybe we should look at Boortz as a hero. What in the hell have you done to get this byzantine, impossible ball and chain from around our necks?

Some onlookers could easily say that you and the rest of the SQL's aren't worth a pimple on Boortz's ass.

If you think that what Boortz and Linder have done is somehow nefarious fine, you have made many points as to why you feel that way. You haven't, for the record, explained how it could be done better than their method to my satisfaction. I suspect that posters and lukers are similarly curious.

I have asked so many of you SQL's over and over again to give us an alternative but all I get is vitriol. Fair Taxers have a plan and it is well documented and well supported. You guys have nothing.

I respect you and I respect Always Right and as far as I can ascertain I will always respect the opinions of you two. But we get the idiotic noise of so many people who obviously have an agenda that we can't be respectful of most.

Here's a question for you that should create some dialog. What would be the agenda of the FT people? Huh? What? Is there some great way that we could profit from a NRST? How? Please explain to me how the FT folks could have some hidden agenda other than equality for all tax payers.

Now, what could possibly be the agenda of the anti's? Well we all know the answer to that don't we? There are thousands of people in Washington who make six figures a year lobbying for preferential tax treatment for their clients. There are millions of people who are employed by tax preference organizations (such as the American Cancer Society which would cease to exist if their reason for existing ((a cure for cancer)) were to ever occur), there are millions of people in corporations who receive little memos from their corporate bossed encouraging them to vote this way or that for favorable tax treatment for their corporation.

365 posted on 11/08/2005 8:48:17 PM PST by groanup (shred for Ian)
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To: Eaglewatcher

The one thing I didn't see on the list is a reference to my only real problem with the Fair Tax.

Money I earned in the past and put in the bank was subject to Federal income tax when I earned it and is all post-tax money.

When I try to spend it under the Fair Tax, it is taxed AGAIN, even though it was taxed once before.

Did I miss it in the article? Does anyone know how this will be addressed. That's two bites at the same apple, and clearly unfair. The Fair Tax doesn't live up to its name.


366 posted on 11/08/2005 8:51:50 PM PST by HitmanLV (Listen to my demos for Savage Nation contest: http://www.geocities.com/mr_vinnie_vegas/index.html)
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To: HitmanNY

See #362 & 363.


367 posted on 11/08/2005 8:59:06 PM PST by pigdog
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To: pigdog

I think that's obfuscation. $1 in the bank (posttax) would be roughly the same as $ 1.50 pretax.

When I go to spend postax money, my earned $1 has $1 of spending power. When I go spend pretax money, I have $1.50 of spending power.

This much is very clear to me. I just don't see how the fair tax doesn't undermine the value of saved money.


368 posted on 11/08/2005 9:02:47 PM PST by HitmanLV (Listen to my demos for Savage Nation contest: http://www.geocities.com/mr_vinnie_vegas/index.html)
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To: Willie Green

Willie, old man, the FairTax is not connected with the tax plan originated by the CATS organization and it is not connected with the Church of Scientology.

Your information is both outdated and wrong.

Have you given up on your class warfare attacks on the FairTax? Those were sort of funny at least.


369 posted on 11/08/2005 9:06:24 PM PST by pigdog
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To: Mojave

Actually, NO - that's not what is promised ... nor even likely to happen. The FairTax promises to be revenue neutral the first year. After that as the economy expands by leaps and bounds, the tax rate can actually be reduced causing each of us to pay less it taxes.

The additional amounts will be made up by both increased growth of the economy and by inclusion of many who have never been in the income tax base - the illegal economy. With these factors working the tax burden on the rest of us can be reduced.


370 posted on 11/08/2005 9:10:48 PM PST by pigdog
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To: Mojave

No - by expanding the economic activity and by broadening of the tax base to include those millions not now in it with the income tax system - the illegal economy.


371 posted on 11/08/2005 9:13:14 PM PST by pigdog
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To: pigdog
but NO you weren't quoting me at all.

As much as you were quoting me.

372 posted on 11/08/2005 9:14:32 PM PST by Mojave
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To: pigdog
admit your ignoprance.

Ignoprance?

Gud speling.

373 posted on 11/08/2005 9:16:29 PM PST by Mojave
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To: pigdog
compliance costs under the FairTax IS 0 (as is zero, zip, nada, nothing, zilch) since there is no compliance

If nobody complies, how will it meet its guarantee of not reducing tax revenues?

374 posted on 11/08/2005 9:18:36 PM PST by Mojave
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To: Your Nightmare

Sorry Nightie ... either rate could be used to calculate it.

Since the FairTax uses tax inclusive it makes sense to keep the calculation in that framework. Your attempt at trying to muddy the water by throwing in tax exclusive makes no sense at all except to the SQL crowd - any attack to try to present a "flaw" is better than none, right??


375 posted on 11/08/2005 9:20:28 PM PST by pigdog
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To: Mojave

How is it you fail to present your alternate tax plan in sufficient detail to be analyzed????


376 posted on 11/08/2005 9:21:43 PM PST by pigdog
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To: pigdog
The worker gets - as stated - 100% pf his paycheck.

And the retailer pf goods takes a "revenue neutral" portion pf the paycheck pf the worker out pf the portion pf that paycheck spent.

Rather disingenuous pf you. Or should I say "your" being disingenuous?

377 posted on 11/08/2005 9:25:06 PM PST by Mojave
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To: pigdog
it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.it's not spam.

Uh huh.

378 posted on 11/08/2005 9:26:23 PM PST by Mojave
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To: sauropod

Your marginal tax rates don't go up (23% tax inclusive as specified in the bill). Only the effective tax rate goes up with increased spending (keeping in mind the effect of the prebate) but they NEVER reach the marginal rate (23%).

The best place to see this effect is on soeme of the examples given on the FairTax website.

Keep in mind, too, that if the FairTax were passed right now the rate would be not 23% but about 19-20% tax inclusive due to the Bush tax cuts in place.


379 posted on 11/08/2005 9:27:06 PM PST by pigdog
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To: Always Right
Jorgenson absolutely with 100% certainty without a doubt said that he assumed take home pay would be the same.

Oh, yeah? Well, er, uh... You shut up!

380 posted on 11/08/2005 9:27:53 PM PST by Mojave
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